The Latin American Aviation Conference in Buenos Aires calls for a bold overhaul of tax systems, aiming to fuel growth and competitiveness in the travel industry.

At the ALTA Aviation Law Americas conference in Buenos Aires, fiscal policies’ impact on the aviation industry’s competitiveness and sustainability took center stage. The panel, titled “Taxation Challenges: Threats to the Aviation Industry in Latin America,” was led by Marcelo Guaranys, a partner at Demarest Advogados. The discussion focused on the UN Tax Committee’s proposal to move away from the current residence-based tax system, where airlines are taxed in their home country, to an origin-based system. Under the new model, taxes would be collected in every country where airlines generate revenue.

Guaranys emphasized the importance of keeping taxation simple for airlines, given the sector’s many specificities. “Due to the international nature of operations, the proposed measure could result in double taxation, both in the country of origin and the destination, which would increase costs for airlines and, consequently, for passengers. We need to ensure that aviation remains a competitive and accessible sector without adding additional obstacles,” he said.

Carlos Protto, Director of International Tax Relations at Argentina’s Federal Revenue Agency, raised concerns about the structure of the UN Tax Committee, where tax experts act in a personal capacity, potentially weakening the proposal. “We are seeking a proper balance between tax collection and creating an environment that supports the growth of the aviation sector, emphasizing the importance of adjusting global policies to combat tax evasion and promote tax fairness,” he noted.

Data from the 2024 Competitiveness Index, conducted by ALTA and Amadeus, reveals that Argentina has the highest tax burden in the region on airline ticket sales, accounting for 72% of the final price. In comparison, Brazil and Chile have adopted more favorable policies by not applying VAT to international tickets. This contrast underscores the importance of promoting international air travel by maintaining competitiveness and ensuring accessibility through supportive fiscal policies.

Ligia da Fonseca, IATA’s Global Head of Tax Policy, highlighted the urgency of global tax harmonization: “The current UN Tax Model Convention minimizes unwarranted administrative and financial burdens for airlines, while fostering a stable fiscal environment to support air connectivity, economic growth, and social development.” Ligia expressed concerns regarding the potential revision of Article 8 of the said model convention, which could lead to the double taxation of airlines’ profits. The IATA representative also stressed the importance of following the existing international tax policies – approved by the UN specialized agency for aviation, the International Civil Aviation Organization (ICAO) – to prevent profound negative impacts on the aviation sector, particularly in developing countries.

The panel wrapped up with a clear call for greater collaboration among governments, airlines, and international organizations to establish a harmonized tax system. Creating a more integrated and efficient fiscal framework is considered vital for boosting competitiveness and fostering the sustainable growth of aviation across Latin America.

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